reverse logistics – The OM Blog by Heizer, Render, & Munson

Guest Post: Returnless Refunds–Cutting Reverse Logistics Costs and Building Loyalty

Prof. Jon Jackson at Providence College raises an interesting logistics issue.

In the evolving landscape of e-commerce returns, major retailers such as Amazon, Target, and Walmart are increasingly adopting “returnless refunds”—granting customers a full refund while letting them keep the item. Though quietly deployed, this strategy addresses operational inefficiencies and builds customer loyalty.

For retailers, traditional online returns impose heavy costs: shipping back, inspecting, restocking or disposing of items, and managing the reverse logistics infrastructure. By eliminating the return flow, retailers cut reverse logistics expenses, simplify operations, and reduce strain on reverse-channel storage and processing staff. Many retailers now use decision-making algorithms to determine return eligibility, factoring in item value, customer return history, resale potential, and handling cost.

According to a recent study cited by the Wall Street Journal (July 24, 2025), the benefits of returnless refunds go beyond just reducing logistics cost. It can also encourage positive reviews, repeat purchases, and stronger brand loyalty—especially when the retailer frames the decision around convenience or sustainability motives.

Despite its promise, returnless refund policies must be carefully calibrated against the risk of return abuse. In 2023, it was estimated that customers returned $743 billion worth of merchandise (or 14.5% of the products they purchased). Of those returns, roughly 14% were fraudulent, costing retailers $101 billion in losses. If customers believes they will receive a returnless refund, it could lead to significantly more fraudulent returns.

In summary, returnless refunds offer retailers a strategic, cross-functional tool that enhances both reverse logistics (a topic in Chapter 11 of your Heizer/Render/Munson text) and customer experience. However, to realize their full value, they must be guided by data, aligned with brand strategy, and protected against abuse.

Classroom Discussion Questions:

How do returnless refund policies affect different parts of the supply chain, and what trade-offs must companies consider when choosing to implement them?
Should companies be transparent with customers about when and why they are offering returnless refunds? What are the ethical and strategic implications?

Guest Post: Fashion Influencers and Revamping Costly Product Returns

Temple U. Professor Misty Blessley raises an interesting inventory issue–returns.

Fashion influencers and their followers are contributing to the increase in rising product returns. According to the National Retail Federation, returns accounted for 17% of retailers’ total 2024 sales. Online purchases have a 26% return rate compared to in-store purchases (10%). Many online shoppers intentionally buy items they plan to return. Statista reports that clothing (24%), shoes (16%), and accessories (12%) are the most returned products – the exact product footprint of fashion retailers. Several recent articles shed light on the influencer effect and tips for revamping costly product returns in retail fashion.

Fashion influencers have popularized trends that promote returns behavior:

Hauls: Influencers showcase purchased fashion items, then decide whether to keep or return them based on follower feedback.
Wardrobing: Influencers buy items for temporary use such as content creation and return them afterward.
Bracketing: Influencers buy multiple sizes or colors of a product to find the perfect fit, with the intention of returning the rest. About 58% of consumers buy multiple sizes for this reason, with 75% of returns attributed to fit.
Influencing: 56% of followers make purchases recommended by an influencer, many of which are later returned.

Returns come with significant costs, including shipping, restocking, reselling at a discount, and administrative expenses. Retailers are adopting strategies to curb or better manage returns:

Charging return fees: Brands like Zara and H&M now charge for returns.
Clarifying return policies: Shortened return windows, stricter conditions for full refunds, and more items marked as final serve to narrow return opportunities.
Improving sizing tools: Enhanced size charts, virtual reality fitting tools, and online fitting rooms help shoppers make better choices.
Implementing logistics systems: Retailers are investing in digital tools to streamline and manage returns more efficiently.

As discussed in Chapter 1 of your Heizer/Render/Munson textbook, best practice can be achieved when operations and supply chain management, marketing, and finance work together.

Classroom discussion questions:

After 89% of retailers adjusted their policies to deter returns, 59% saw return rates increase. What factors could explain why these policies fail to get the desired result?
The SCOR Model, discussed in Chapter 11, outlines attributes for processes like source, make, and deliver. How are the attributes for returns like or different from these processes?

OM in the News: A New Twist on Reverse Logistics

Walgreens has struck about a dozen deals with companies in a bid to increase pharmacy revenue.

Some retailers believe that getting more directly involved in reverse logistics could them win new customers. Walgreens and Nordstrom will let online shoppers at other brands and retailers pick up or return orders at stores, the Wall Street Journal reports (April 17, 2019), a sign of how retailers are teaming up in new ways to draw customers as more shopping shifts online. Walgreens will offer package pickup and returns at more than 8,000 U.S. locations to companies including Levi Strauss and Urban Outfitters. For example, when shoppers want to return a product purchased on Levi.com, they can choose to ship it to Levi, drop it off at a Levi store, or take it to a Walgreens store.

Nordstrom will test the tactic at Los Angeles-area stores with a group of brands. The strategy highlights how e-commerce is pressing retailers to adjust to changing consumer habits and reset relationships between brands and stores. Department store Kohl’s has helped drive the trend by allowing Amazon returns at about 100 of its stores.

The rise of Amazon and new shopper habits have prompted many brick-and-mortar retailers to reevaluate how they allocate space. Last year, Saks Fifth Avenue moved its beauty department from its traditional spot on the high-traffic first floor in some stores, rebuilding on the 2nd floor to provide more room to offer services and compete with rivals.

Chains are also forming partnerships that would have been unthinkable years ago, including carving out real estate for their competitors in the name of getting people in the door. The industry is still grappling with how to navigate the logistic and competitive challenges these partnerships can bring.

Classroom discussion questions:

Is it easy to set up such reverse logistics systems?
What are the ramifications of Sak’s layout decision?

OM in the News: Reverse Logistics Takes Over Now that the Shopping is Done

The holiday season brings a series of challenges to the supply chain industry — especially as e-commerce continues to grow. Companies have to efficiently ensure that customers’ packages will arrive in a timely matter, putting added stress on the warehouse and transportation sector. But the peak season doesn’t end once the holidays are over. In fact, reverse logistics makes the busy season last even longer as more people return unwanted holiday gifts. Here are 3 observations from Supply & Demand Chain Executive (Jan, 11, 2019):

1. Delivering hassle-free returns is critical to retaining customers, and consumers are looking to shop with brands that quickly provide refunds. Retailers must leverage tracking for returns and offer progress reports on the transaction, which requires an efficient supply chain.

2. Overly consumer friendly return policies encourage a costly rate of returns. L.L. Bean ended its lifetime return policy this year because it led to “abusive” returns, costing the company $250 million in losses over the last 5 years. When particular items are consistently being sent back, inaccurate product descriptions or sizing can overburden reverse networks. While the push to use less packaging materials can reduce a company’s carbon footprint and costs, a delicate balance must also be achieved. If packaging fails to adequately protect merchandise during transit, it is more likely to arrive damaged, prompting items to be returned more frequently.

3. Some retailers are leveraging dedicated reverse networks to handle returns, grading out products to be entered back either into regular sales or second channel distribution. Designing facilities specifically for reverse logistics allows companies to process returns more efficiently and effectively.

A strategically designed reverse network allows retailers to shrink the time frame from the start of the return to when a customer receives a refund. Organizations that empower their brick-and-mortar stores to process online returns can reduce the stress of returns for customers and decrease the amount of time returned merchandise is in the reverse chain.

Classroom discussion questions:

Why is reverse logistics important?
Define a “closed loop supply chain.” (See Ch.11)

OM in the News: Recycling and Christmas Returns

Piles of inventory at a warehouse in Lanham, Md — Piles of inventory at a warehouse in Maryland

The Christmas gifts have been delivered, and Secret Santa is done. Americans returned $260 billion in merchandise last year, up more than 66 percent from 5 years ago–a quarter of which was during the holiday season! As e-commerce sales surge and free return shipping becomes the norm, shoppers are set to return even more this year. To get shoppers used to buying without touching, web retailers have offered generous return policies. Almost half of e-commerce sellers–including Zappos, Macy’s, Target, Saks and Gap — now offer free return shipping in many categories. “Especially with electronics goods, a hot item becomes yesterday’s goods so quickly,” said an industry expert. “And who wants to try to sell a returned winter coat in February?”

Little known to shoppers, however, is that a majority of returned items never make it back to retailers’ shelves. Instead, the items wind their way through liquidators, wholesalers and resellers, many of the purchases ending up in landfills. As much as 2 million tons of returned items — most of it undamaged merchandise — are thrown away each year, enough to fill over 200,000 garbage trucks. Returns, in short, are not just a big loss for retailers. They are a big and growing environmental burden. So more and more companies are becoming players in the “reverse logistics” industry handling returns in the United States, one that is growing together with the rise of online sales, reports The New York Times (Dec. 29, 2015).

By amassing returns from retailers, recyclers are able to find takers for products with a lower resale value, like dented metal filing cabinets and other office furniture for scrap recyclers, which pay for goods or materials in bulk. Traditional retailers typically recover only about 20-40% of the retail cost of returned goods; recyclers help companies recoup 50-70% of the cost.

Classroom discussion questions:

What can operations mangers do to improve the return process and lessen waste losses?
Describe the reverse logistics industry.